The 2025 budget has finally landed and while many of the changes were to be expected, there’s still some updates for business owners to digest.
It’s definitely been an announcement to remember, with the Office for Budget Responsibility sharing the details an hour before the official announcement. After months of speculation, this budget gives businesses a clearer picture of what the next few years will look like.
In this blog, we’re covering the key changes and what they mean for businesses, business owners and employees – so something for everyone.
What this means for employers and finance teams
The biggest change for employers is around payroll. From April 2026, the National Living Wage for over-21s will rise to £12.71, with the National Minimum Wage for 18 to 20 year olds increasing to £10.85. While that’s likely to be welcome news for teams but will add pressure for employers, especially those with larger hourly workforces.
Payroll costs will rise in other ways too. The employer NIC threshold will stay frozen until 2031, and from 2029, pension contributions made through salary sacrifice that go above £2,000 per person will attract both employer and employee NICs. If pensions form a key part of your reward package, it’s worth reviewing who this could impact and when.
Digital compliance is also stepping up a gear. HMRC will require all VAT-registered businesses to use e-invoicing by 2029, and earlier collection of Self Assessment tax via PAYE will begin around the same time. These changes won’t hit day-to-day operations immediately, but they might affect your longer-term finance system planning.
For businesses using electric vehicles, costs will change slightly too. From April 2028, a new per-mile Electric Vehicle Duty (eVED) will apply, adding roughly £240 per year for the average driver. Changes to benefit-in-kind rules for Employee Car Ownership Schemes (ECOS) have been pushed back to 2030, giving everyone a bit more breathing room.
What this means for founders, investors and business owners
For many founders, the standout change is the increase to dividend tax rates from April 2026.
The basic rate will rise to 10.75%, and the higher rate to 35.75%. If dividends form part of your remuneration strategy, this could influence how you extract profits and may be something to review ahead of time.
There is good news for scaling businesses looking to raise capital. Limits for EIS and VCT funding will increase from 2026, with knowledge-intensive companies receiving the biggest boost. This gives founders more flexibility to raise meaningful growth capital.
EMI share schemes are also set to become more flexible. Larger companies will be able to qualify, option limits are increasing and some of the admin requirements are being simplified. If you’re planning a funding round, expanding your team or preparing for a future exit, it’s a good time to revisit your scheme and make sure it still supports the next stage of your growth.
What this means for individuals
Frozen tax thresholds continue to make the biggest impact on individuals day-to-day. Income Tax and NIC bands will remain frozen until 2031, which means more people will naturally drift into higher tax brackets over time. Plan 2 student loan thresholds are also frozen, so graduates may see higher repayments over the coming years.
From 2027, the cash ISA allowance for under-65s will fall from £20,000 to £12,000, and from 2028, homes valued above £2 million will face a new annual council tax surcharge.
Savings and property income will also be taxed at higher rates from 2027, which is worth knowing if you have rental property or significant investment income outside your company.
On the day-to-day side, there’s a little relief with the freeze on regulated rail fares and the extension of the 5p cut to fuel duty, though both measures remain temporary.
Capital Investment and R&D: What you need to know
From 2026, businesses will have access to a new 40% first-year allowance for main-rate assets. At the same time, the writing down allowance will fall from 18% to 14%. Full expensing is still available for many assets and will remain the most generous option where it applies. If you’re planning capital projects over the next few years, it’s worth revisiting your timelines to see how these changes affect your cash flow.
On R&D, there were no big structural changes – and for many businesses, that stability will be welcome. The Government has made it clear that R&D relief is still an important part of the UK’s innovation strategy, but scrutiny is tightening. Relief is absolutely still there and still valuable, but claims need to be well prepared, well evidenced and thought through early.
Need help figuring out your next steps?
There’s a lot wrapped up in this year’s Budget, and no two businesses will feel the effects in the same way. Whether you’re thinking about payroll planning, remuneration strategy, funding, capital investment or R&D, we’re here to help you navigate the detail and make confident decisions.
If you want to chat through what this means for your business, just give us a shout – we’re always happy to help.
